Volume 1: Consumer Price Indices

New Zealand

Official title

Scope

Official base

Source of weights

The results were completed with data from other sources such as production and trade statistics, housing surveys and other public or private sources. The weighting pattern for the current index is based on expenditure on goods and services by private households for the year ended 31 March 1988. Expenditure for this period is then rated up to the December 1988 quarter price level, using the price movements of appropriate CPI commodities. The survey's target population is all New Zealand resident private households living in the two main islands of New Zealand except for very remote rural areas. New Zealand resident households are those in which the head of the household has lived in New Zealand for at least 12 months. 95 per cent of the overall population falls within this definition. The expenditure weights of all items covered by the index are allocated to priced commodities, either by direct (percentage) allocation to one or more commodities or on a pro rata basis to two or more commodities (sometimes a section, sub-group or group is nominated) or by a combination of these methods.

Weights and composition

Note: (a) The number of price quotations for each item in the index is not available.

Household consumption expenditure

Certain areas of expenditure are excluded, not because they fall outside the conceptual coverage of the index, but because movements in prices cannot be satisfactorily measured, nor can they be adequately indicated by the price movements of any other related or associated commodities which could be priced, e.g. works of art, court fines, charitable donations, catering charges and pets.

An expenditure-commitment approach is used in the current index to weight owner-occupied housing. Under this approach the expenditure weight assigned to owner-occupied housing is the gross expenditure incurred by the index population in purchasing and constructing dwellings in the reference year, offset by the proceeds from housing sales.

In New Zealand, householders place great value on the security of tenure of their housing. It is therefore considered that purchase and construction of dwellings should be included in the regimen if the index is to be a relevant measure of the household population's actual price-paying experience.

The weight for other durable goods is also determined by an expenditure-commitment approach. The full cost of durable goods is taken into account at the time of purchase, regardless of when payment is actually made, or when the commodity is actually consumed. Charges for credit services for the purchase of durables are a separate commodity in the same section of the regimen.

The expenditure weight for most second-hand goods is added to that for new goods of the same class. Only the prices of new commodities are surveyed, as it is assumed that price movements of second-hand goods will be similar. The exceptions are second-hand cars and previously-occupied housing, which are separate commodities in the regimen.

The value of trade-ins and related sales are netted from purchases of equivalent commodities when calculating expenditure weights.

Life insurance payments and superannuation contributions are excluded because they represent savings rather than expenditure. House, mortgage repayment, house contents and motor vehicle insurance are included as separate commodities in the index regimen.

Licence fees and health-care services are included in the index regimen.

Method of data collection

Outlets located in suburban shopping centres are currently included in the sample of index outlets at which food and non-food grocery prices are surveyed. Other commodities are priced mainly in the central shopping districts of urban areas, to reduce the travel costs of survey interviewers. Some outlets in the major suburban shopping areas are also surveyed, but as most suburban retail outlets are branches of central city outlets with common prices, widespread suburban pricing is not generally considered to be necessary.

Where commodity prices are surveyed by an interviewer, the outlets are currently selected using purposive sampling procedures. Prices are surveyed from a representative sample of outlets most commonly patronised by the index population. Prices from each outlet are given equal weights and averaged.

Probability sampling is used to select outlets for a variety of postal surveys such as those for dwelling rentals and solicitors' fees.

Fresh fruit and vegetable prices are surveyed each Friday in the 15 main and secondary urban areas. All other food commodities are price-surveyed on or around the 15th of each month in the same 15 urban areas. Prices of commodities in the Household supplies section of the index, except gardening supplies, are also surveyed each month, as are those of newspapers, electricity, gas, cigarettes and tobacco, alcohol and domestic air fares. Petrol prices are surveyed twice a month. All these commodities are also priced in the 15 urban areas.

The remaining index commodity prices that are surveyed by departmental field staff are collected each quarter, on or close to the 15th of the middle month of the quarter.

Surveys of prices for the Consumers Price Index are carried out, in general, by personal visits to retail outlets by full-time departmental field staff, based in the four main urban areas.

For some commodities, shelf prices may be unobtainable or inappropriate; e.g. some materials for home maintenance, motor mowers, carpets and upholstered furniture sometimes fall into this category, and in such cases the interviewer obtains the list price.

Quarterly postal price surveys are used for the following index commodities: housing rentals; expenses for the purchase and financing of home ownership; contractors' charges for home maintenance jobs; coal and firewood; household furniture removal; insurance premiums for dwellings, household contents, motor vehicles and medical care; health services; prescription charges; telephone charges; credit card charges; holiday accommodation; urban, suburban and long-distance bus and rail fares; sea travel; taxi fares; used cars; motor vehicle registration; automobile association membership; driving school fees; cinema and theatre admissions; admissions to sporting venues and events; sports club subscriptions; labour union dues; veterinary fees; music tuition fees; primary, secondary and tertiary educational tuition fees; kindergarten and child care fees; and magazine subscriptions.

Actual ticket prices are generally surveyed for the purpose of calculating the index. Discounts, to the extent that they reduce the ticket price of the surveyed commodity, are included. Informal, individually-negotiated discounts are not reflected in the index. Sale prices recorded during the normal course of price surveys are included in the index. There is no distinction between free-market and official prices. For technical reasons, illegal transactions are not covered by the index. Credit charges for new and used cars and hire purchase charges (other than for motor vehicles), are included in the present index in the same section as the related commodity. The method of pricing credit charges involves compounding the changes in the interest rate charged in respect of the loan with changes in the prices of the commodities for which the loans were raised. Except for used cars and previously-owned property, only the prices of new commodities are surveyed. Changes in import prices, to the extent that these influence the prices of surveyed commodities, are included in the index.

Factors determining the number of price quotations are:

1. The degree of similarity in the price movements of commodities in a particular grouping. If they have similar price movements, an accurate price-change indicator can be derived from a relatively small number of surveyed commodity prices.
2. The overall and relative importance of the commodities within the grouping. In general, the more important a grouping, the larger the number of commodities that will be price-surveyed.
3. If a single national price prevails for a commodity, only one price quote is required.

Housing

Sections and previously-occupied houses and flats: property sales data for houses, flats and residential sections, processed at quarterly intervals by the government valuation agency, Valuation New Zealand, are used to prepare the property price inputs.

Construction of dwellings: the changing quarterly cost of constructing a dwelling (houses and flats) is measured using the data obtained from a sample of builders who provide prices for set plan house specifications.

Purchase of newly-constructed houses and flats: the house construction price series is combined with section-price movements to generate the price change indicator for the purchase of newly-constructed houses and flats.

Mortgage interest: This relates to the cost of borrowing the same average real amount of money to assist in the finance of a dwelling purchase as in the index base period. This is described as a simple revaluation method. Mortgage interest price-change calculation, therefore, involves the product of two separate indicators: (i) the change in the average interest rate paid on existing property mortgages; and (ii) the price change of dwelling property itself, as this is the appropriate price measure to ensure the purchasing power (or the real value of the borrowed finance) is kept unchanged (constant quality). Average interest rates paid on outstanding dwelling mortgages for the whole private household population are obtained from the Department's household expenditure survey. Quality control of the mortgage profile, the interest rates of which are measured in the household survey, is achieved through time-to-run stratification of the mortgage sample, each stratum having a fixed weight in the index. This practice was adopted on the assumption that the utility of a mortgage at any time is chiefly determined by the amount of money lent and the balance of the period of the loan.

Land agents' and conveyancing fees: Since scale fees were abandoned, the Department of Statistics has conducted quarterly postal surveys for both Land Agents' and Conveyancing Fees. A randomly-selected sample of each group is used. Real Estate Agents' and Conveyancing Fees are influenced by the value of the traded property. A change in the average fee paid on a fixed basket of traded properties can therefore arise either from a change in fees and/or from a change in property price levels. The questionnaires survey the fees for transactions relating to properties with specified purchase of sale prices. These prices are adjusted each quarter by changes in previously-occupied property prices.

Specification of varieties

Substitution, quality change, etc.

Seasonal items

Computation

Other information

Organisation and publication

Idem: News Release (quarterly).

Idem: Hot off the Press (Information Release).

Idem: New Zealand Official Year Book.